REG - Persimmon Plc - Half-year results for 6 months ended 30 June 2016 <Origin Href="QuoteRef">PSN.L</Origin> - Part 2
23/08/2016 10:34
- Part 2: For the preceding part double click ID:nRSW8347Ha
Six months to 30 June 2016 Six months to 30 June 2015 Year to 31 December 2015
Basic earnings per share 92.0p 77.3p 170.3p
Underlying basic earnings per share 93.3p 78.6p 173.0p
Diluted earnings per share 89.2p 75.6p 166.4p
Underlying diluted earnings per share 90.4p 76.8p 169.1p
The calculation of the basic and diluted earnings per share is based upon the following data:
Six months to 30 June 2016£m Six months to 30 June 2015£m Year to 31 December 2015£m
Underlying earnings attributable to shareholders 287.0 240.8 530.2
Goodwill impairment (4.0) (3.8) (8.3)
Earnings attributable to shareholders 283.0 237.0 521.9
5. Dividends/Return of capital
On 1 April 2016 the fourth payment of the Capital Return Plan being £338.3m (or 110p per share) was
paid as a cash dividend.
Six months to 30 June 2016£m Six months to 30 June 2015£m Year to 31 December 2015£m
2015 Return of capital to B shareholders of 95p per share - 99.8 99.8
2015 Dividend to C shareholders of 95p per share - 191.3 191.3
2016 Dividend to all shareholders of 110p per share 338.3 - -
Total return to shareholders 338.3 291.1 291.1
6. Inventories
30 June 2016£m 30 June 2015£m 31 December 2015£m
Land 2,085.5 2,030.1 2,046.7
Work in progress 587.4 508.5 517.9
Part exchange properties 27.4 66.1 38.3
Showhouses 42.2 43.4 42.4
2,742.5 2,648.1 2,645.3
At 30 June 2016 the Group conducted a further review of the net realisable value of its land and work
in progress portfolio. This review did not give rise to an exceptional credit or debit to the
consolidated statement of comprehensive income (2015: £nil). Our approach to the net realisable value
review has been consistent with that conducted at 31 December 2015 which was fully disclosed in the
financial statements for the year ended on that date. The key judgements in estimating the future net
present realisable value of a site were the estimation of likely sales prices, house types and costs
to complete the developments. Sales prices and costs to complete were estimated on a site by site
basis based upon existing market conditions. If the UK housing market were to improve or deteriorate
in the future then further adjustments to the carrying value of land and work in progress may be
required. Following this review £42.7m (2015: £84.2m) of inventories are valued at fair value less
costs to sell rather than at historical cost.
7. Available for sale financial assets
30 June 2016£m 30 June 2015£m 31 December 2015£m
Available for sale financial assets at beginning of period 177.9 201.3 201.3
Additions 0.4 0.7 1.3
Settlements (23.2) (16.6) (40.4)
Gains (Finance income) 8.1 7.5 15.7
Available for sale financial assets at end of period 163.2 192.9 177.9
There have been no gains/losses recognised in other comprehensive income other than those recognised
through finance income in profit and loss. Of the gains recognised in finance income for the period
£3.3m (2015: £4.1m) was unrealised.
8. Financial Instruments
In aggregate, the fair value of financial assets and liabilities are not materially different from
their carrying value. Financial assets and liabilities carried at fair value are categorised within
the hierarchical classification of IFRS 7 Revised (as defined within the standard) as follows:
30 June 2016Level 3 30 June 2015Level 3 31 December2015Level 3
£m £m £m
Available for sale financial assets 163.2 192.9 177.9
Available for sale financial assets
Available for sale financial assets are carried at fair value. The fair value is determined by
reference to the rates at which they could be exchanged by knowledgeable and willing parties. Fair
value is determined by discounting forecast cash flows for the residual period of the contract by a
risk adjusted rate.
There exists an element of uncertainty over the precise final valuation and timing of cash flows
arising from these assets. As a result the Group has applied inputs based on current market conditions
and the Group's historic experience of actual cash flows resulting from such arrangements. These
inputs are by nature estimates and as such the fair value has been classified as level 3 under the
fair value hierarchy laid out in IFRS 13: Fair Value Measurement.
Significant unobservable inputs into the fair value measurement calculation include regional house
price movements based on the Group's actual experience of regional house pricing and management
forecasts of future movements, weighted average duration from inception to settlement of 10 years
(2015: 10 years) and discount rate of 8% (2015: 8%) based on current observed market interest rates on
secured second loans.
The discounted forecast cash flow calculation is dependent upon the estimated future value of the
properties on which the available for sale financial assets are secured. Adjustments to this input,
which might result from a change in the wider property market, would have a proportional impact upon
the fair value of the asset. Furthermore, whilst not easily assessable in advance, the resulting
change in security value may affect the credit risk associated with the counterparty, influencing fair
value further.
9. Reconciliation of net cash flow to net cash
Six months to30 June 2016£m Six months to30 June 2015£m Year to31 December2015£m
(Decrease)/increase in net cash and cash equivalents in cash flow (108.4) (100.4) 192.0
Net cash at beginning of period 570.4 378.4 378.4
Net cash at end of period 462.0 278.0 570.4
10. Retirement benefit assets/obligations
The amounts recognised in the consolidated statement of comprehensive
income are as follows:
Six months to30 June2016£m Six months to30 June2015£m Year to 31 December2015£m
Current service cost 1.2 1.5 3.0
Administrative expense 0.4 0.4 0.9
Pension cost recognised as operating expense 1.6 1.9 3.9
Pension cost recognised as net finance credit (0.3) - -
Total defined benefit pension cost recognised in profit or loss 1.3 1.9 3.9
Remeasurement charges/(gains) recognised in other comprehensive expense/income 58.2 (11.5) (7.5)
Total defined benefit scheme charge/(gain) recognised 59.5 (9.6) (3.6)
The amounts included in the balance sheet arising from the Group's
obligations in respect of the Pension Schemes are as follows:
30 June2016£m 30 June2015£m 31 December2015£m
Fair value of Pension Scheme assets 536.0 513.3 512.0
Present value of funded obligations (575.2) (501.8) (494.0)
Net pension (liability)/asset (39.2) 11.5 18.0
An update on the 31 December 2015 IAS 19 valuation, adjusted for current
market conditions, has been obtained from the schemes' actuary as at 30
June 2016 and has been used as the basis for these figures. The
remeasurement charges recognised in the period largely resulted from a
reduction in the applied discount rate due to the fall in UK bond yields.
This gave rise to an increase in the fair value of the Group's pension
scheme liabilities in the period.
11. Related parties
There are no disclosable related party transactions (as required by DTR
4.2.8R) during the period (2015: none).
12. Seasonality
In common with the rest of the UK housebuilding industry, the Group
experiences the highest level of sales in spring and autumn, which also
results in peaks and troughs in the Group's working capital profile.
Therefore, any economic weakness which affects the peak selling seasons
can have a disproportionate impact on the reported results.
Principal risks
Risk Impact Mitigation
UK's exit from the EU Following the referendum vote on 23 June 2016 and the decision to leave the European Union, uncertainty surrounding the UK economy has increased. Such uncertainty may reduce consumer confidence such that demand and pricing for new homes may be impacted affecting revenues, profits and cash flows and may result in the impairment of asset values. In addition, the devaluation of the UK currency and a possible tightening of the availability of construction skills due to potential changes to legislation governing free movement of labour may impact costs and build activity. We continue to closely monitor the impact of this increased uncertainty on the UK economy and the housing market through the review of external information and changes in
the behaviour of our customer base. Close management of work in progress levels matching supply to demand will continue and land investment decisions will continue to be
assessed to ensure exposure to market disruption is mitigated. The overall shortage of supply of housing in the UK may provide a degree of support to the housing market
should these circumstances arise. Action taken by the Government to adjust policy to support UK economic performance may provide further mitigation as might any response
with respect to interest rates by the Bank of England.We will continue to employ robust tendering processes to maintain strong cost control over Group sourcing. In
addition, we will remain focussed on our training initiatives to improve the supply of the necessary construction skills the Group requires.
National and regional economic conditions The housebuilding industry is sensitive to changes in unemployment, interest rates and consumer confidence. Any deterioration in economic conditions may significantly decrease demand and pricing for new homes, which could have a material effect on our business revenues, margins and profits and result in the impairment of asset values. We control the level of build on-site by closely managing our work in progress levels. We carry out extensive due diligence prior to our land investment decisions to
capture best returns. We monitor our geographical spread to mitigate the effects of local microeconomic fluctuations. We monitor lead indicators on the future direction
of the UK housing market so as to manage our exposure to any future market disruption.
Mortgage availability Any restrictions in the market availability of mortgages for our customers could reduce demand for our homes and affect revenues, margins and profits. We monitor Bank of England commentary on credit conditions. We ensure that our investment in land and construction is appropriate for our level of sales and our
expectations for market conditions. We monitor the Council of Mortgage Lenders' monthly reports and lenders' announcements for trends in lending.
Health and safety The health and safety of our employees, subcontractors, home owners and visitors to our construction sites is of paramount importance to us. Accidents on our sites could lead to reputational damage and financial penalties. We ensure that the Board's health and safety strategy is implemented by our comprehensive management systems and controls, overseen by our Group Health and Safety
Department to minimise accidents on our sites.
Regulatorycompliance Our business is subject to extensive and complex laws and regulations relating to planning and the environment. Our obligations to comply with legislation can result in delays causing us to incur substantial costs and prohibit or restrict land development and construction. Non compliance could also result in damage to the Group's reputation. We operate comprehensive management systems to ensure regulatory compliance. We hold a landbank sufficient to provide security of supply for short to medium term
requirements and engage extensively with planning stakeholders.
Resources Rapid expansion in UK housebuilding has driven an increase in demand for both materials and skilled labour and may cause costs to increase ahead of our expectations. We closely monitor our build programmes enabling us to manage and react to any supply chain issues. We operate in-house apprentice and training programmes to support our
need for increased skilled labour.
Strategy The Board has adopted its strategy as it believes it is the one most likely to add the greatest sustainable value for shareholders and stakeholders. It is possible that, with time, factors become known that indicate that the strategy currently being pursued is not the most effective or efficient and that alternative strategies may be more appropriate. The Group's strategy is agreed by the Board at an annual strategy meeting and thereafter regularly reviewed at Board meetings and by the Executive Directors. The Board
engages with management and employees to ensure the strategy is communicated and understood and that all employees have a clear understanding of the potential benefits
and risks of the strategy.
The Chairman's statement and the above section on principal risks comprise the Company's interim management report.
Statement of Directors' responsibilities in respect of the Half Year Report
We confirm that to the best of our knowledge:
• the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU
• the Half Year Report includes a fair review of the information required by:
º DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements and a description of the principal risks and uncertainties for the remaining six months of the year; and
º DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
The Directors of Persimmon Plc are:
Nicholas Wrigley Chairman
Jeff Fairburn Group Chief Executive
Mike Killoran Group Finance Director
David Jenkinson Group Managing Director
Jonathan Davie Non-Executive Director
Marion Sears Non-Executive Director
Rachel KentletonNigel Mills Non-Executive DirectorNon-Executive Director
By order of the Board
Jeff Fairburn Mike Killoran
Group Chief Executive Group Finance Director
22 August 2016
The Group's annual financial reports, half year reports and interim management
statements are available from the Group's website at
www.corporate.persimmonhomes.com.
Independent Review Report to Persimmon Plc
Introduction
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
June 2016 which comprises the Condensed Consolidated Statement of
Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed
Consolidated Statement of Changes in Shareholders' Equity, the Condensed
Consolidated Cash Flow Statement and the related notes 1 to 12. We have read
the other information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK and
Ireland) "Review of Interim Financial Information Performed by the Independent
Auditor of the Entity" issued by the Auditing Practices Board. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our work, for this report, or for the conclusions
we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the group are
prepared in accordance with IFRSs as adopted by the European Union. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with International Accounting Standard
34, "Interim Financial Reporting", as adopted by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review.
Scope of Review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK and Ireland) and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 June 2016 is not prepared, in all
material respects, in accordance with International Accounting Standard 34 as
adopted by the European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Ernst & Young LLP
London
22 August 2016
This information is provided by RNS
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